Friday, December 19, 2008

The Edge Daily (KUALA LUMPUR): After a lapse of several months, plantation stocks were back among the top gainers on Bursa Malaysia yesterday.

The plantation index rose 209.17 points to close at 4,172.64 despite the overall bearish outlook for crude palm oil (CPO).

IOI Corp Bhd, Kuala Lumpur Kepong Bhd and United Plantations Bhd were among the top 10 gainers yesterday, rising 32 sen, 35 sen and 30 sen to RM3.62, RM9 and RM10.40, respectively. Sime Darby Bhd, the world’s largest listed plantation company, was among the most active stocks, adding 15 sen to RM5.65.

Sime Darby president and group chief executive Datuk Seri Ahmad Zubir Murshid attributed the rise in stock prices to the anticipated decline in production and stock levels.

“It is all about stock levels and the demand for the festive season. This is the time production level is anticipated to come down,” he said yesterday.

CPO stock levels for November increased to 2.27 million tonnes from 2.1 million tonnes in October. But going forward, stock levels are expected to fall.

The head of a local research house said that the strong performance of plantation counters could be due to year-end window-dressing.

“The performance of these stocks came as quite a surprise. I wouldn’t jump on the bandwagon; their comeback wasn’t a result of any major shift in fundamentals,” he said.

A report by Reuters said the firmer prices for plantation stocks were due to expectations a weaker US dollar would boost sales of CPO and bolster earnings.

Meanwhile, CPO for March 2009 delivery fell RM35 to RM1,545 a tonne on Bursa Malaysia Derivatives, as oil prices fell to 4½-year lows yesterday. The decline in oil prices came despite the Organisation of Petroleum Exporting Countries announcing it would make its largest-ever production cut, by 2.2 million barrels a day, next month.

Light, sweet crude oil for January delivery slipped to a low of US$39.19 (RM137.16) a barrel in electronic trading on the New York Mercantile Exchange yesterday, the lowest since July 2004. As at 5.30pm, it had settled at US$40.50 per barrel.

RHB Research said crude oil prices were expected to remain a volatile trigger for CPO prices, with demand uncertainties persisting into next year.

“We maintain our CPO price assumptions of RM2,800 per tonne for CY2008, RM1,600 for CY2009 and RM1,500 for CY2010. Post-2009 and into 2010, we expect CPO prices to remain weak due to the more fundamental reason of a rise in CPO supply coming from Indonesia, when plantation land starts coming into maturity once more,” it said.

Other analysts also remained largely neutral on plantation stocks, mainly due to high CPO inventories and the continued downtrend in crude oil prices.

OSK Research, in a note, said although production was 0.5% higher year-on-year to 1.66 million tonnes in November, the decline in net exports due to record palm oil imports caused inventory to hit its new record high.

“We are maintaining our neutral call on the sector given that palm oil prices are likely to remain sideways until inventory levels start getting pared down, at which point we think palm oil prices will be ready for a new upcycle. Until we get there, our preference is for companies with strong downstream operations as their earnings are more defensive in a weak CPO price environment,” the research house said.

It cited IOI Corp and Kulim (M) Bhd as two of the strongest downstream players, recommending a trading buy on both stocks.

A palm oil trader opined that a year-end rally in CPO was unlikely given the slowdown in the global economy.

“With prices at the RM1,500 level, palm plantation players are still making money. But for prices to pick up and rally by year-end is unlikely,” he said.

He said that a recovery in CPO prices to the RM2,000 level was possible in the first half of 2009.

“There are a few elements which determine the movement of CPO prices. Palm oil’s discount to soyabean oil has narrowed, so there would be some impact. What could also affect CPO prices is the demand-supply factor, but that has not been drastically affected so far,” the trader said.

He also said there would be no immediate impact from the move by six plantation companies to reduce the use of fertilisers.

“The impact from the firms’ decision to cut down or stop using fertilisers to control production would only be seen six months later,” he said.

From the demand perspective, palm oil remained attractive and exports had gone up.

According to independent cargo surveyor Intertek Testing Services, palm oil products for the period Dec 1 to 10 surged 93% to 619,180 tonnes from 320,081 tonnes shipped between Nov 1 and 10.

Exports to the Indian subcontinent jumped to 139,611 tonnes from 40,450 tonnes while exports to China climbed to 155,820 tonnes from 91,179 tonnes.

Another cargo surveyor, Societe Generale de Surveillance, estimated a 94% jump in the country’s CPO exports in the first 10 days of December compared with the same period in November. About 611, 225 tonnes of Malaysian bulk palm oil shipments were tracked during the period.

Dec. 19 (Bloomberg) -- The yen fell against the euro on speculation the Bank of Japan will today lower borrowing costs and say it will buy commercial paper to combat a global recession.

The yen may also weaken for a second day against the dollar on speculation Japanese officials will intervene to stem its surge to a 13-year high. The dollar declined against the euro, heading for its biggest weekly loss since the 15-nation currency’s 1999 debut, after the Federal Reserve introduced near- zero interest rates and said it would focus on buying debt, a policy known as quantitative easing.

“It’s clear the BOJ has to respond with some combination of rate cuts and additional measures to improve liquidity,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The alternative of doing nothing would be taken as tacit approval of sharp yen appreciation.”

The yen declined to 127.72 per euro as of 9:46 a.m. in Tokyo from 127.44 late yesterday in New York, when it reached a six- week low of 130.92. It was little changed at 89.46 versus the dollar. The yen surged to 87.14 per dollar on Dec. 17, the highest level since September 1995. The dollar declined to $1.4277 versus the euro from $1.4240. The yen may weaken to 90 per dollar today, Ishikawa said.

The yen has appreciated 25 percent against the dollar this year, the most since 1987, as more than $1 trillion of credit- market losses sparked a seizure in money markets and threw the global economy into a recession.

Rate Decision

There’s a 50 percent chance the BOJ will lower its target lending rate from 0.3 percent today, according to calculations by JPMorgan using overnight interest-rate swaps. The central bank will announce its decision around midday in Tokyo. Governor Masaaki Shirakawa will hold a briefing at 3:30 p.m. local time.

“The BOJ is set to cut rates to 0.15 percent,” Fiona Lake, a Hong Kong-based analyst at Goldman Sachs Group Inc., wrote in a note to clients. “Contrary to history, the yen is likely to benefit given the Bank of Japan’s experience with this policy framework compared to elsewhere.”

The yen fell against the dollar and euro yesterday as Japan’s government signaled it may intervene in the foreign- exchange market for the first time in four years.

Finance Minister Shoichi Nakagawa said at a news conference in Tokyo that he has “the means” to limit the yen’s rally. Central banks buy or sell currencies when they seek to influence exchange rates.

‘Abnormal’

Honda Motor Co. President Takeo Fukui this week described the yen’s level as “abnormal” and called on the government and central bank to take “swift action.” Japan’s second-largest automaker cut its full-year profit forecast by 62 percent, citing a surging yen and falling sales in North America and Europe.

“The rhetoric from Japan picked up in a fairly significant way,” said Jim McCormick, London-based global head of foreign- exchange and local-markets strategy at Citigroup Inc., in an interview on Bloomberg Radio yesterday.

The last time Japan intervened on its own, it sold a record 20.4 trillion yen ($228 billion) in 2003 and 14.8 trillion yen in the first quarter of 2004, when the yen strengthened to 103.42 per dollar. Japan hasn’t bought yen since 1998, when it spent 3.05 trillion yen as the currency reached a low of 147.66.

Declines in the yen may be limited by speculation the BOJ may introduce new measures to increase liquidity without lowering its benchmark rate. Jiji Press and the Mainichi newspaper both said today the BOJ will keep its benchmark rate at 0.3 percent, citing unidentified people familiar with the matter.

Weekly, Yearly Loss

“There are divided views on what exactly the BOJ will do,” said Tokichi Ito, deputy general manager of foreign exchange in Tokyo at Trust & Custody Services Bank Ltd., a unit of Japan’s second-largest publicly traded lender. “At this point, traders will simply have to wait for the outcome. Should the BOJ keep rates on hold, then the yen would rally.”

The dollar headed for a 6.4 percent decline against the euro this week after the U.S. central bank lowered the fed funds target on Dec. 16 to a range of zero to 0.25 percent, the lowest among major economies. The Fed reiterated plans to purchase agency debt and mortgage-backed securities and said it will study buying U.S. government debt.

The U.S. currency gained 2.2 percent against the euro this year, 32 percent versus the British pound and 27 percent against the Australian dollar as investors bought the greenback to flee riskier assets and repay dollar-denominated loans from lenders reining in credit.

Treasuries

Treasuries rallied yesterday, pushing yields on 10- and 30- year securities to record lows as demand for the safety of principal outweighed prospects for record debt sales. U.S. government bonds headed for their best year since 1995.

The pound was little changed at 94.70 pence per euro. It fell yesterday to a record low of 95.57 pence on speculation the Bank of England will follow the Fed in cutting the target lending rate to near zero. Sterling bought $1.5079 from $1.5015.

“We expect further economic weakness in the U.K.,” Brian Kim, a Stamford, Connecticut-based currency strategist at UBS AG wrote in a research note yesterday. “While fiscal and monetary stimulus will likely help combat the slowdown, we still target the pound at $1.45 in the next three months.”

Dec. 19 (Bloomberg) -- Crude oil was steady after falling 22 percent this week to plunge below $36 a barrel for the first time since June 2004 amid declining demand and the weakening economy.

Oil for delivery in future months has dropped less than the contract for January as supply has swollen in the storage hub for crude traded in New York. The U.S. Energy Department said consumption will be lower in 2009 because of the recession. OPEC agreed Dec. 17 to cut output by 2.46 million barrels a day.

“There’s a lot of supply and not a lot of storage left,” said Adam Sieminski, Deutsche Bank’s chief energy economist, in Washington. “There’s a hope somewhere that the economy will be better in 12 months and the OPEC cuts will start to have their intended impact.”

Crude oil for January delivery rose 3 cents to $36.25 a barrel at 10:48 a.m. Sydney time on the New York Mercantile Exchange. The January contract expires today. The more-active February contract rose 68 cents, or 1.6 percent, to $42.35 a barrel.

Prices have tumbled 75 percent from a record $147.27 on July 11. Yesterday, January futures plunged $3.84, or 9.6 percent, to the lowest settlement since June 29, 2004. They touched $35.98 in intraday trading.

February futures cost $5.45 a barrel more than January oil yesterday, based on Nymex settlement prices. It’s the biggest premium between the two most-active contract months in Bloomberg data going back to 1986. The spread allows oil traders who can line up credit and storage space to lock in profits by buying and holding crude oil to sell a month from now.

Oil Contango

Oil for delivery in January 2010 is 53 percent more than for delivery in January 2009, increasing the opportunity for traders to profit. This price structure, in which the subsequent month’s price is higher than the one before it, is known as contango.

Contango trading encourages companies to increase stockpiles. U.S. crude-oil supplies rose in 11 of the past 12 weeks, according to the DOE. Inventories at Cushing, Oklahoma, where oil that’s traded on Nymex is stored, climbed 21 percent to 27.5 million barrels last week, the highest since May 2007, the government said Dec. 17.

“Unless demand picks up appreciably, the front-month contracts will remain under pressure because nobody wants to take delivery,” said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. “We could see a lot of fireworks.”

Demand Decline

“The continuing decline in demand is running ahead of supply cuts,” said Robert Ebel, chairman of the energy and national security program at the Center for Strategic and International Studies in Washington. “Right now OPEC has its fingers crossed. If this doesn’t work, they will have another meeting soon and make another cut.”

World oil consumption next year will drop by 0.2 percent to 85.68 million barrels a day, OPEC said in a Dec. 15 report. The U.S. Energy Department said on Dec. 9 that global demand will decline 0.5 percent to 85.3 million barrels a day.

JPMorgan Chase & Co., the largest U.S. bank by assets, reduced its 2009 average oil price forecast to $43 a barrel from $69 as a global economic slowdown causes a contraction in demand. The prospect of oil falling to $25 is “hard to dismiss amid a serious deterioration of economic conditions and building stocks,” the bank said in a report released Dec. 17.

“When you look at the spare capacity that is being created, even if prices do start to pick up, you will see more leakage of supply onto the market,” Lawrence Eagles, global head of commodities research at JPMorgan Chase in New York, said in a conference call yesterday.

OPEC has called on other exporters to help it bolster prices. Non-OPEC members Russia and Azerbaijan signaled Dec. 17 that they may be willing to trim supplies to help the group.

Norway, the fifth-biggest oil exporter, according to the country’s Ministry of Petroleum and Energy, won’t follow OPEC’s decision to cut output, Stein Hernes, a spokesman for the ministry, said in an e-mailed response to questions yesterday.

“The market doesn’t seem to have any confidence in their ability to manipulate the market,” said Tom Bentz, senior energy analyst at BNP Paribas in New York. “Even if they make the promised cuts, it will be a long time before we see evidence of it here.”

Oil companies have booked 25 supertankers to store crude, enough to supply France for almost a month. The vessels, equal to about 5 percent of the global fleet, can carry as much as 50 million barrels.

“The market is failing to find any support,” Bentz said. “The worries about demand are still out there because of the recession. We’ve got at least 45 million barrels of excess floating storage out there on top of all the storage we’ve got on land.”

Brent crude oil for February settlement declined $2.17, or 4.8 percent, to settle at $43.36 a barrel on London’s ICE Futures Europe exchange.

Dec. 18 (Bloomberg) -- Gold fell in New York for the first time this week as the dollar rebounded, eroding the appeal of the metal as an alternative investment. Silver also declined.

The dollar rose as much as 1.5 percent against a weighted basket of six major currencies, after dropping 5.7 percent in the previous three days as gold climbed 5.9 percent. Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, reached a record 775.3 metric tons yesterday. The metal is headed for an eighth-straight yearly gain.

“The dollar is the major issue pushing gold down today,” said Tom Hartmann, a commodity analyst at Altavest Worldwide Trading Inc. in Mission Viejo, California. “The dollar’s uptrend is still intact.”

Gold futures for February delivery fell $7.90, or 0.9 percent, to $860.60 an ounce on the New York Mercantile Exchange’s Comex division.

Silver futures for March delivery fell 30 cents, or 2.6 percent, to $11.12 an ounce on the Comex. The most-active Silver contract has dropped 25 percent this year, while gold is up 2.7 percent.

Gold yesterday reached $883.60, the highest since Oct. 10. The seven-day relative strength index for gold futures has been above 70 all week, an indication to technical traders that the price is headed lower in the near term.

“Gold has had a nice run here, so I wouldn’t be surprised to see some selling,” said Marty McNeill, a trader at R.F. Lafferty Inc. in New York. “We’re running into some resistance between $870 and $880.”

Covering Losses

As asset prices fall, investors may also sell the metal to cover losses in other markets. The Standard & Poor’s 500 Index of equities and the Reuters/Jefferies CRB Index of 19 commodities both are down 38 percent this year. Gold is the fourth-best performer on the CRB Index and may be used to raise cash, analysts said.

“We have to get through a bout of deflation in commodity prices,” said Hartmann of Altavest. “Gold doesn’t do well in a deflationary environment.”

Still, gold’s losses may be limited as the Federal Reserve’s interest-rate cut this week weakens the dollar and erodes the currency’s allure as a haven for investors. As the credit crisis unfolded, the dollar surged between July and November, pushing yields on three-month Treasury notes below zero for the first time this month.

Policy makers reduced the benchmark lending rate from 1 percent to a range between zero and 0.25 percent on Dec. 16, the lowest ever. The Fed began cutting borrowing costs from 5.25 percent in September 2007 as the economy headed into a recession.

Smelling Fear

“The Fed’s actions show just how dire the credit crisis is and how desperate they are,” said Ralph Preston, a commodity analyst at Heritage West Futures Inc. in San Diego. “The metals smell the fear. Market psychology is beginning to view gold as a safe haven.”

Gold may average $820 next year, with gains coming in the first half, analysts at Barclays Capital said yesterday in a quarterly report.

“In the near term, prices are likely to remain torn between two camps,” Barclays said. “A pick-up in physical demand and additional safe-haven buying will support prices, but the need to liquidate positions to meet margin calls elsewhere will cap gold’s upside potential.”

Thursday, December 18, 2008

FCPO 3rd month March Futures contract close RM35 lower to close RM1545 as compare to previous trading session with 4902 lots traded in the market. CPO price was opened lower due to weak crude oil and soybean oil overnight closing.

Technically, CPO price mainly sideways throughout the entire trading session. However, CPO price was seen temporary supported above the support levels at RM1540 region. Traders were advice to hold long position in the coming trading session around the next support levels at RM1520 and RM1490 region instead of taking position too rush. Resistances were seen at RM1580 and RM1620 region.

FKLI December futures contract rose 21.5 point higher as compare previous trading session to close at 892 with total of 6868 lots traded in the market. FKLI was opened higher during trading session despite of weak Dow Jones overnight closing.

Technically, to our surprise, FKLI was seen surge up all the way during trading session without any minor pull back. Yesterday, FKLI was seen pegged at 50% Fibonacci projection figure at 892 levels. We expect FKLI would surge higher in the coming trading session while support was seen at 860 and 840 regions. Traders were advice to hold long position in the coming trading session while being cautious around the next resistance levels at 907 and 928, both are 61.8% and 78.6% Fibonacci projection figures.

At 2:45 p.m. (0915 GMT), January futures NSOF9 on the National Commodity and Derivatives Exchange were up 1.39 percent at 459.50 rupees ($9.7) per 10 kg. The February contract NSOG9 was trading up 0.73 percent at 448.65 rupees.

Malaysian palm oil futures KPOc3 on the Bursa Malaysia Derivatives Exchange were up 1.49 percent to 1,568 ringgit per tonne, rising on short-covering after losing nearly 7 percent in the previous three days.

Soyoil traders often watch Malaysian palm oil as the two commodities compete in many markets and as a result prices of the oils move in tandem.

Expectations of a cut in crude oil supplies by OPEC pushed up prices and boosted sentiment for vegetable oils, which are used to make biofuels, said Suresh Mantri, an analyst with Ventura Commodities Pvt Ltd.

Spot prices in Indore, a hub for the soyoil trade in the central state of Madhya Pradesh, rose 0.95 percent to 42,500 rupees per tonne.

Dec. 17 (Bloomberg) -- OPEC, supplier of more than 40 percent of the world’s oil, agreed to cut production quotas by a larger- than-expected 9 percent to revive prices as a global recession reduces demand for crude.

The Organization of Petroleum Exporting Countries set a quota for 11 of its members of 24.845 million barrels a day, starting Jan. 1, compared with its current target of 27.308 million barrels a day, OPEC President Chakib Khelil said. The record 2.46 million barrel-a-day cut is larger than a 2 million-barrel drop indicated yesterday by Saudi Arabian Oil Minister Ali al-Naimi.

“OPEC is sending a message that they are trying to cut pretty seriously,” said Mike Wittner, head of oil research at Societe Generale SA in London. “If they need more cuts, there will be more cuts.”

Crude oil fell as low as $39.88 a barrel in New York, the lowest since July 2004, on skepticism OPEC will adhere to its new agreement and after a government report showed rising U.S. crude stockpiles. Oil’s $100-a-barrel collapse from July’s record has curbed revenue for producers, threatening government budget shortfalls. Saudi Arabia’s King Abdullah said last month that producers need crude at $75 to spur investment in new fields.

Russia, the biggest oil exporter outside of OPEC, today pledged to curb exports too, as it did a decade ago when oil sank toward $10 a barrel.

‘Dramatically Low’

“If OPEC would not do what it has to do given demand destruction, the price could stay at a level that is really dramatically low,” Venezuelan Oil Minister Rafael Ramirez said after today’s meeting.

OPEC announced the new quota by saying the group had agreed to reduce output by 4.2 million barrels a day from September’s actual production level of 29.045 million barrels a day for the same 11 nations. That measure of actual production came from an average of analyst and news agency estimates compiled by OPEC’s Vienna-based secretariat.

To be sure, OPEC often pumps more than its quotas permit. Last month, the 11 nations, excluding Iraq and Indonesia, pumped 629,000 barrels a day more than the ceiling, according to OPEC’s monthly report. U.S. Energy Information Administration acting head Howard Gruenspecht said compliance with cutbacks will be “critical” in determining how oil markets will react.

Today’s decision is OPEC’s biggest ever reduction in quotas, exceeding a 1.9 million-barrel, 8.3 percent cut agreed in March 2000, when Iran was temporarily excluded from the ceiling. The new quota will be 2.2 million barrels a day lower than OPEC’s December production, Khelil said.

Russian Help

Russia may cut exports by 320,000 barrels a day next year if prices remain weak, after reducing daily exports by 350,000 barrels last month, Russian Deputy Prime Minister Igor Sechin said earlier today in Oran.

Other non-OPEC producers, including Kazakhstan, may trim supply as well, Sechin said. Azerbaijan may lower production as much as 300,000 barrels a day, Azeri Energy Minister Natig Aliyev said in Oran. Mexico’s energy ministry spokesman Hector Escalante yesterday declined to say whether it will aid OPEC cuts while Norway has said it has no plans to lower production.

Forecasts for oil consumption have shrunk during the past few months as the global recession weighs on consumers and industries. The International Energy Agency says global oil demand will contract this year for the first time since 1983.

In the U.S., oil consumption will be almost flat through 2030, as the use of biofuels, rising prices and new car efficiency standards temper demand, the Energy Information Administration, part of the U.S. Energy Department, said in a statement today.

London Summit

“The fall in oil prices in recent months has benefited the economy at a difficult time and helped hard-pressed consumers,” U.K. Energy Minister Mike O’Brien said in a statement after OPEC’s announcement. The U.K. will host a summit of energy ministers, including Saudi’s al-Naimi, in London in two days time.

Falling oil prices may delay or halt investment in exploration and production projects, setting up a possible “supply crunch” in future years, IEA Chief Economist Fatih Birol said on Dec. 10. Cheaper fossil fuels may also deter efforts to develop wind, solar and other alternative energy sources.

Oslo-based StatoilHydro ASA and Royal Dutch Shell Plc of The Hague postponed investments in Canada’s oil sands this year after tumbling prices reduced potential profits.

Saudi Arabia’s Manifa oil field will start in 2011 only if consumers require the extra crude, al-Naimi said in an interview today. “When we need it, it will be there,” he said, adding that the start of the field depends on the “market situation.”

OPEC will next meet on March 15 in Vienna and chose Angolan Oil Minister Jose Maris Botelho de Vasconcelos as its president for 2009.

Dec. 17 (Bloomberg) -- Gold prices rose to the highest in nine weeks as the dollar tumbled after the Federal Reserve cut U.S. borrowing costs, boosting the appeal of the precious metal as an alternative investment. Silver jumped more than 6 percent.

The dollar fell for a sixth straight session, dropping as much as 2.7 percent against a weighted basket of six major currencies. Yesterday, the Fed cut its benchmark rate to a target range of zero to 0.25 percent from 1 percent. Gold, which generally moves in the opposite direction of the dollar, is headed for an eighth straight annual gain.

“These actions by the Fed are the exact thing that got us in trouble in the first place,” said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. “The dollar is doomed, and gold can go to $1,200.”

Gold futures for February delivery rose $25.80, or 3.1 percent, to $868.50 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $883.60, the highest since Oct. 10. The metal soared to a record $1,033.90 on March 17.

Silver futures for March delivery climbed 71.5 cents, or 6.7 percent, to $11.42 an ounce, the biggest increase since Nov. 24.

Gold has climbed 3.6 percent this year, while silver is down 23 percent.

The Fed began slashing rates from 5.25 percent in September 2007 as the economy headed into a recession. Policy makers said yesterday that the central bank will use “all available tools” to stimulate growth.

The Fed reduced the federal-funds rate from 6.5 percent in December 2000 to 1 percent by June 2003, where it stayed before rising again a year later. Yesterday’s reduction brought the rate to the lowest ever.

‘Financial Mess’

“We got into this financial mess because of easy credit and leveraged money, and now the Fed wants to encourage the same thing,” Kaplan said.

Since the second quarter of 2007, banks worldwide have posted more than $1 trillion in writedowns and credit losses related to investments in subprime mortgages.

“It’s hard to figure out a bear case for precious metals,” said Chip Hanlon, the president of Delta Global Advisors Inc. in Huntington Beach, California.

The U.S. government has made commitments of more than $8.5 trillion to help ease the credit crisis and pull the country out of a recession that began a year ago.

Gold also may benefit as a hedge against accelerating prices, analysts said.

“When inflation starts to rear its head again following very loose monetary policy, investors will have to park their money elsewhere to preserve their capital,” said Gijsbert Groenewegen, a fund manager at Gold Arrow Capital Management in New York.

Declining Consumer Prices

Consumer costs dropped 1.7 percent in November, the steepest decline on record, the U.S. Labor Department said yesterday. Last year, gold rallied 31 percent as the inflation rate rose the most in two decades.

Still, some investors are hesitant to buy gold as the economy suffers what may be the worst recession since World War II and prices of all assets decline. The Reuters/Jefferies CRB Index of 19 raw materials is down 37 percent this year and the Standard & Poor’s 500 Index of equities has fallen 38 percent.

“Deflationary forces remain intact,” said Dennis Gartman, an economist and the editor of the Gartman Letter in Suffolk, Virginia. He told clients to remain neutral on gold.

Dec. 18 (Bloomberg) -- Crude oil fell to the lowest in more than four years on skepticism that OPEC’s larger-than-expected supply cut will be enough to boost prices.

Oil extended yesterday’s 8.1 percent decline after the Organization of Petroleum Exporting Countries agreed in Oran, Algeria, that the group’s 11 members with quotas will trim current production by 2.46 million barrels a day to 24.845 million barrels a day. Oil also dropped after the U.S. government said supplies climbed for the 11th time in 12 weeks.

“It’s less than meets the eye,” said Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co. in New York. “This may stem the bloating in stocks but isn’t enough to get rid of the surplus.”

Crude oil for January delivery fell as much as 87 cents, or 2.2 percent, to $39.19 a barrel and traded at $39.58 at 8:19 a.m. Singapore time on the New York Mercantile Exchange. That’s the lowest since July 13, 2004.

Prices have tumbled 73 percent from a record $147.27 on July 11. Yesterday, futures declined $3.54 to $40.06 a barrel, the lowest settlement since July 13, 2004.

Dec. 17 (Bloomberg) -- The world’s biggest currency-trading firms say the dollar’s appeal as a haven amid the financial crisis all but evaporated.

The U.S. currency slid to a 13-year low against the yen today and had its biggest one-day decline versus the euro after the Federal Reserve reduced its target interest rate yesterday to a range of zero to 0.25 percent, the lowest among the world’s biggest economies. CMC Markets said today the currency’s prospects appear “ominous.” State Street Global markets said the dollar’s outlook has been “undermined.”

“The dollar has been under heavy downward pressure,” said Robert Minikin, a senior currency strategist in London at Standard Chartered Bank Plc. “This move is very well-justified and has a long way to run.” Standard Chartered is preparing to cut its dollar forecasts, Minikin said.

Yesterday’s rate cut brings the Fed’s target to below the Bank of Japan’s for the first time since January 1993. U.S. policy makers repeated plans to buy agency debt and mortgage- backed securities and said they will study buying Treasuries, a policy known as quantitative easing.

The dollar fell to 87.14 yen, the lowest since July 1995, before trading at 87.45 yen as of 3:51 p.m. in New York, from 89.05 yesterday. It depreciated to $1.4437 per euro from $1.4002 and traded at $1.4366, the weakest since Sept. 30.

‘Ominous’ Outlook

The dollar is likely to decline “longer term,” analysts including New York-based Ashraf Laidi at CMC Markets wrote in a report. “Prospects ahead appear particularly ominous for the world’s reserve currency once global economic stability starts to build up.”

The Fed’s debt purchases will cause the dollar to weaken to $1.4860 per euro, analysts led by Robert Sinche, New York-based head of global currency strategy at Bank of America Corp., wrote in a report yesterday. The Fed reduced the scarcity of dollars and investors slowed the deleveraging process, which drove the currency to a 2 1/2-year high against the euro in October, Sinche said.

“Those temporary supports for the dollar appear to have eroded,” Sinche wrote. “Aggressive quantitative easing by the Fed should add to U.S. dollar supply globally and undermine the value of the dollar.”

State Street Global Markets, a unit of the world’s largest money manager for institutions, said the Fed’s move is “perilous” for the dollar as investors accumulated an “extreme” long position on the currency, or bets it will climb.

Record Low Yields

“This implies a significant potential for a dollar unwind if the real money community attempts to chase price,” Hong Kong-based strategist Dwyfor Evans wrote today in a report. The shift toward quantitative easing “has undermined the U.S. dollar significantly over recent weeks.”

The dollar’s decline against the euro compares with a similar move in the early 1990s, indicating the U.S. currency may weaken to a record low of $1.65 late next year, Citigroup Inc. strategists Tom Fitzpatrick in New York and Shyam Devani in London wrote in a research note.

“If it walks like a duck and talks like a duck … it’s a duck,” Fitzpatrick and Devani wrote. “The dollar walks and talks like a currency going back into its bear market.”

The dollar declined 11 percent against the euro and 8 percent against the yen this month as yields on two-, five-, 10- and 30-year Treasuries fell to record lows, encouraging investors to look outside the U.S. for higher returns.

“The dollar is going to struggle while it has low yields,” said Roddy MacPherson, the Edinburgh-based head of currency strategy at Scottish Widows Investment Partnership Ltd., which manages the equivalent of $152 billion. “We’re looking to add to our short dollar position if U.S. yields continue downward.”

UBS Stays Bullish

MacPherson said he moved toward a short dollar position, or a bet it will depreciate, against the euro in the past four days. The currency may end next year at $1.40 per euro, he said.

For UBS AG, the world’s second-largest foreign-exchange trader, demand for cash amid the freeze in bank lending will support the currency. The Libor-OIS spread, a gauge of cash scarcity favored by former Fed Chairman Alan Greenspan, was at 140 basis points today, or about 14 times its average in the five years before the credit crisis began.

“There is still a premium on liquidity, which will be supportive to the dollar even in the current environment,” said Geoff Kendrick, a senior strategist in London at UBS.

Goldman Sachs Group Inc. said investors can profit from the dollar’s decline by selling the currency for its Canadian counterpart.

The U.S. currency’s drop is becoming “broader-based,” Jens Nordvig, a New York-based strategist for the U.S. securities firm, wrote today. “Temporary dollar demand from deleveraging and funding flows has come to an end. The prospect of aggressive quantitative easing is starting to have a significant negative impact on the dollar.”

Wednesday, December 17, 2008

FCPO 3rd month March Futures contract close RM35 higher to close RM1580 as compare to previous trading session with 4063 lots traded in the market. CPO price was opened higher due to firm crude oil and soybean oil electronic trading while waiting for OPEC meeting on 17th Dec 2008.

Technically, CPO price mainly traded sideways upwards and forms flag formation in the hourly chart which rebound levels were seen at 50% Fibonacci retracement levels. We expect CPO price would traded further lower in the coming trading session to challenge next support region RM1530 and RM1500. However, we still view CPO price slowly emerging a healthy up trend in the coming trading session. Traders were advice to hold long position around the support level at RM1530 and RM1500 region. Resistances seen at RM1600 and RM1650 levels.

FKLI December futures contract rose 5.5 point higher as compare previous trading session to close at 870.5 with total of 6191 lots traded in the market. FKLI was opened slightly lower during trading session despite to strong Dow Jones overnight closing.

Technically, FKLI price seem topped around 200% Fibonacci projection figures at 873 region while pre-forms a head and shoulder formation in the 5 min chart which view as rounding top on the hourly chart. We expect FKLI would retrace slightly in the next trading session around support levels at 863 and 860 region; both were 61.8% and 78.6% Fibonacci retracement figure. Traders were advice to hold long position around the support levels provided if critical support levels at 852 and 842 were not violated. Resistances were seen at 877 and 890 region.

HAMBURG, Dec 16 (Reuters) - Global palm oil prices are likely to rise in coming months and will help strengthen other vegetable oil markets, Hamburg-based oilseeds analyst Oil World said on Tuesday."We forecast prices of crude palm oil (cif Rotterdam) will increase to $660 in Jan/June 2009," it said in a weekly report. Cif Rotterdam crude palm oil prices are now around $500 a tonne.

Dec. 17 (Bloomberg) -- The dollar traded near the lowest level in more than two months versus the euro after the Federal Reserve cut the target rate to a range of zero to 0.25 percent, making the greenback the lowest-yielding currency among industrialized nations.

The dollar posted its biggest five-day drop against the euro since the 15-nation currency’s 1999 debut and traded near a 13-year low versus the yen as the central bank shifted its focus to the amount and type of debt it buys to ease the recession. European Central Bank President Jean-Claude Trichet signaled on Dec. 15 it may pause in reducing borrowing costs at its meeting in January.

“The impact on the dollar is negative,” said Toru Umemoto, chief currency analyst in Tokyo at Barclays Capital, a unit of Britain’s second-biggest lender. “In a financial crisis a central bank should buy whatever it deems fit. The Fed hasn’t set any target to its quantitative easing. One risk is this will damage the central bank’s balance sheet.”

The dollar traded at $1.4045 per euro as of 8:40 a.m. in Tokyo from $1.4002 late yesterday in New York, when it reached $1.4147, the weakest level since Oct. 1. The dollar was quoted at 88.95 yen from 89.05 yen. It touched 88.53 yen on Dec. 12, the lowest level since August 1995. The euro traded at 124.88 yen from 124.71.

Nine rate cuts in the past 14 months and $1.4 trillion in emergency lending have failed to reverse the longest recession in a quarter-century. Chairman Ben S. Bernanke said in a Dec. 1 speech that the Fed will need to focus on “the second arrow in the central bank’s quiver -- the provision of liquidity.”

Debt Purchases

The Fed’s statement noted that it has already announced it will purchase agency debt and mortgage-backed securities and said the central bank is ready to expand the program. The Fed said it is weighing the potential benefits of buying longer-term Treasuries.

The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, fell 1.9 percent to 80.683 yesterday. It has fallen 5.6 percent over the past week.

“The kitchen-sink approach means the dollar is going to weaken,” said Todd Elmer, currency strategist at Citigroup Global Markets in New York. “It further shows the Fed’s commitment to mitigating the crisis.”

The dollar has declined 12 percent from a 2 1/2-year high of $1.2330 per euro on Oct. 28 on reduced demand for short-term funding in the greenback. It dropped 7.3 percent versus the euro over the past five days.

Falling Libor

The cost of borrowing in dollars for three months in London fell yesterday on speculation policy makers will keep pumping cash into money markets to spur bank lending. The London interbank offered rate, or Libor, that banks say they charge each other for such loans dropped 0.02 percentage point to 1.85 percent, the lowest level since September 2004, British Bankers’ Association data showed.

Yesterday’s reduction by the central bank pushed the fed funds target below the Bank of Japan’s 0.3 percent rate. Japanese policy makers struggled in the 1990s to revive growth as the combination of deflation and recessions stranded the nation in the so-called Lost Decade.

The ECB reduced its benchmark rate three times since the end of September, lowering it to 2.5 percent from 4.25 percent to contain the fallout from the global financial crisis. The Bank of England cut its key rate to 2 percent from 5 percent during the same period.

ECB Rate

“Do we have a feeling there is a limit to the decrease in rates? At this stage certainly yes,” Trichet told journalists in Frankfurt on Dec. 15. Asked whether the bank will refrain from a further rate reduction next month, he said policy makers want to “concentrate at this stage on getting what we already decided to be really operational.”

The U.S. currency fell 20 percent against the yen this year, the most since 1987, about $1 trillion of credit-market losses sparked a seizure in money markets and threw the U.S. economy into a recession.

The Group of Seven, which comprises the U.S., Japan, Germany, the U.K., France, Italy and Canada, propped up the dollar in 1995, when it sank to a post-World War II low of 79.75 yen. Central banks intervene when they buy or sell currencies to influence exchange rates.

Dec. 17 (Bloomberg) -- Crude oil rose above $44 a barrel as U.S. stocks climbed to a five-week high after the Federal Reserve cut its benchmark interest rate to a record low and said it will employ “all available tools” to revive the economy.

The Fed cut the main U.S. interest rate to as low as zero for the first time and shifted its focus to the amount and type of debt it buys in an attempt to end the longest slump in a quarter-century. Unemployment rose to 6.7 percent last month, the highest level since 1993, while builders broke ground on the fewest new homes since record-keeping began in 1947.

Crude oil for January delivery rose 71 cents, or 1.6 percent, to $44.31 a barrel at 10:23 a.m. Sydney time on the New York Mercantile Exchange. Prices have tumbled 70 percent from a record $147.27 on July 11.

Yesterday, futures fell 91 cents, or 2 percent, to $43.60 a barrel on skepticism that OPEC will reduce production targets enough at a meeting today to halt a decline in prices.

Futures tumbled after Saudi Arabian Oil Minister Ali al-Naimi said yesterday that the Organization of Petroleum Exporting Countries should trim output by 2 million barrels a day, on his arrival in Oran, Algeria. Oil extended its declines immediately after the Fed action.

“OPEC is struggling to cut enough production to deal with slowing demand, and not too much so that they are responsible for a further deepening of the recession,” said Adam Sieminski, Deutsche Bank’s chief energy economist, in Washington.

Excess Supply

OPEC members and other producers, such as Russia, are under increasing pressure to reduce supplies as oil’s $100-a-barrel collapse cuts export revenue, creating budget shortfalls.

“You know that supply is somewhat in excess of demand, inventories are also higher than normal, therefore to bring things in balance, there will be a cut in production of about 2 million barrels,” al-Naimi said.

The producer group is asking Russia to cut production by 400,000 barrels a day and other non-OPEC nations to curb a further 200,000 barrels a day, OPEC Secretary-General Abdalla el-Badri said yesterday in Oran.

World oil use in 2009 will drop by 0.2 percent to 85.68 million barrels a day, the OPEC secretariat said in a report yesterday. That’s 1 million barrels a day lower than forecast last month. The U.S. Energy Department said on Dec. 9 that global demand will decline 0.5 percent to 85.3 million barrels a day.

The Paris-based International Energy Agency, which coordinates energy policy in 28 developed countries, said in a Dec. 11 report that fuel consumption worldwide will increase by 0.5 percent to 86.3 million barrels a day next year. The IEA depends on data from the International Monetary Fund to make its forecasts.

Optimistic Forecast

“The IEA said demand will grow next year based on the IMF global economic outlook,” Sieminski said. “It’s almost as if they are apologizing for being stuck with the forecast.”

The global economic slump will prompt the IMF to revise its economic forecasts in January, the group’s chief, Dominique Strauss-Kahn, said Dec. 15 at a conference in Madrid.

“The IEA’s optimistic assumption for global oil demand growth in 2009 will likely get clipped severely in January when they adopt the new IMF forecast for 2009 world GDP,” Sieminski said.

Bets that February oil will fall below $40 a barrel were the most active options in New York yesterday. February $40 puts, bets the price will drop below that level, rose 44 cents to $2.77 a barrel, or $2,770 a contract, on volume of 921 lots in Nymex electronic trading. One contract is for 1,000 barrels of oil.

U.S. Supplies

Implied volatility for crude oil, the major factor in determining options prices, reached 158.759 Dec. 15, according to data released by Nymex. It was the highest close in Bloomberg data going back to 1986. It’s a gauge of expected price swings.

U.S. crude-oil and fuel supplies have climbed as the recession crimps demand.

Inventories probably rose 600,000 barrels last week, according to the median of 11 responses in a Bloomberg News survey conducted before an Energy Department report today. The report will probably show that supplies of gasoline and distillate fuel, a category that includes heating oil and diesel, also increased.

Brent crude oil for February settlement fell 49 cents, or 1 percent, to $46.65 a barrel on London’s ICE Futures Europe exchange. The January contract expired yesterday, after declining 4 cents to $44.56 a barrel.

Dec. 16 (Bloomberg) -- Gold prices extended a rally to the highest in more than two months after the Federal Reserve cut U.S. borrowing costs, driving the dollar lower and boosting the appeal of the precious metal as an alternative investment.

The Fed cut the benchmark lending rate to a “target range” of zero to 0.25 percent from 1 percent. Policy makers said in a statement that the Fed “will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability.” The dollar fell as much as 2.1 percent against a basket of six major currencies.

“The dollar is going to the sewer, and this is highly bullish for gold,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “The Fed is going to put as much liquidity into the system as it takes, but at the end of the day, what’s their exit strategy? It’s a huge inflationary bubble.”

Gold futures for February delivery rose as high as $857.50 in electronic trading on the Comex division of the New York Mercantile Exchange, the highest for a most-active contract since Oct. 15. The price settled at $842.70 at the end of floor trading, up $6.20. The metal traded at $852.80 at 3:11 p.m.

Gold jumped to a record $1,033.90 on March 17. Rate cuts sent the dollar to an all-time low against the euro in July.

Tuesday, December 16, 2008

FKLI December futures contract rose 8 point higher as compare previous trading session to close at 865 with total of 3517 lots traded in the market.

Technically, hourly FKLI price chart show FKLI remain holding firm above the previous resistance trend line throughout the entire trading session and manage to surge up from 847 after long hours of consolidation. FKLI closed above the resistance levels at 863; 61.8% Fibonacci projection figures after consolidate for more than 5 hours. We expect FKLI would climb higher in the coming trading session provided support levels at 840 and 847 were well hold. Traders were advice to hold long position in the coming trading session while being cautious around the resistance levels at 870 and 882 region.

FCPO 3rd month March Futures contract close RM35 lower to close RM1545 as compare to previous trading session with 6327 lots traded in the market. CPO price was opened lower due to unexpected weak crude oil overnight closing despite of yesterday strong crude oil electronic trading during the trading hours.

Technically, CPO today seems to challenge the 50% Fibonacci retracement levels at RM1520 levels and support seems holding well against the selling pressure. However, we expect CPO price would try to search for firm support around RM1490 levels; 61.8% Fibonacci retracement figures before starts to surge new high in the coming trading session. Traders were advice to hold long position around the support levels at RM 1525 and RM1500 region while being cautious around the resistance levYeon Sziang: around the resistance level at RM1560 and RM1600 regions.

Dec. 15 (Bloomberg) -- OPEC, the producer of 42 percent of the world’s oil, may make the biggest supply cut in a decade to halt the plunge in crude prices as demand drops for the first time since 1983.

The Organization of Petroleum Exporting Countries will probably lower output targets by at least 2 million barrels a day, or 7.3 percent, when its members meet Dec. 17, according to 18 of 33 analysts surveyed by Bloomberg. While Saudi Arabia’s King Abdullah said last month that his country needs oil priced at $75 a barrel to spur development, Goldman Sachs Group Inc. predicts crude may slide to $30 from $46.28 today.

Oil’s $100 a barrel collapse since July ended a windfall that quadrupled OPEC export revenue in five years, instead creating government budget shortfalls. Ecuador, a member of the group, said last week it will default on foreign debt. The U.A.E., Kuwait and Qatar need crude above $55 to balance their current accounts and fiscal spending, Citigroup Inc. estimated.

“There is a real danger of oil going down to $30 a barrel unless OPEC acts boldly and decisively,” said David Hufton, managing director of PVM Oil Associates Ltd. in London, the world’s largest broker of over-the-counter crude trading between banks, hedge funds and oil companies.

Prices tumbled from a record $147.27 on the New York Mercantile Exchange in July to a four-year low of $40.50 just five months later. Crude for January delivery rose as much as $2.72, or 5.9 percent, to $49 a barrel in electronic trading on the New York Mercantile Exchange. It was at $48.54 at 11:14 a.m. in London.

‘Sizeable’ Cut

OPEC Secretary-General Addalla el-Badri said a “sizeable” output cut is need to remove excess supplies from the market. “Stocks are very high, we need to take action at this time,” he told reporters when he arrived at his hotel in Oran today.

President Chakib Khelil said Dec. 11 ministers had reached a consensus that a “severe” cut is needed at the meeting this week in Oran, Algeria. Qatari minister Abdullah bin Hamad al- Attiyah, Venezuela’s Rafael Ramirez and Libya’s Shokri Ghanem also said they are prepared to reduce supplies. The group agreed in October to reduce production by 1.5 million barrels a day, starting Nov. 1.

“With oil having dropped to sub-$50, the Algeria meeting puts them under pressure to cut again,” said Mike Rothman, oil research head at International Strategy & Investment Group in New York, and former chief energy strategist at Merrill Lynch & Co.

OPEC Struggle

OPEC’s struggle to revive prices follows six years of gains as global growth accelerated, led by China. Rising prices led investors and pension funds to pour more than $200 billion into commodities, seeking greater returns than those offered from stocks and bonds.

The resulting bubble in oil, grains and metals burst in July, as the collapse in the U.S. subprime-mortgage market saddled financial companies with almost $1 trillion of losses and writedowns and led to the failure of Lehman Brothers Holdings Inc.

As investors fled commodity markets, outstanding oil futures contracts, called open interest, tumbled 23 percent in New York to 1.16 million.

Oil could fall below $25 next year as the recession limits demand, Merrill Lynch commodity strategist Francisco Blanch in London said Dec. 4. Benjamin Dell, an oil analyst at Sanford C. Bernstein & Co. in New York, said it may take a year for prices to rebound.

Recession Threat

The U.S. recession threatens to become the longest of the postwar era as companies cut workers and investment, with real gross domestic product forecast to contract 0.8 percent in 2009, according to estimates compiled by Bloomberg.

Weakness in the world’s largest economy is leading this year’s 200,000 barrel-a-day decline in global oil demand to 85.8 million a day, according to the International Energy Agency in Paris. Oil use hasn’t fallen since 1983, when U.S. interest rates of more than 9.25 percent stifled growth.

“Investors should focus on three signals, a recovery in U.S. gross domestic product, a return to positive global oil consumption and a stabilization in the U.S. dollar,” Dell wrote Dec. 10. “We expect all three by late 2009.”

PVM’s Hufton said the 13-nation OPEC needs to lower supply 1.5 million barrels a day, with Russia, which isn’t a member, idling 500,000 barrels a day, to avoid oil falling to $30 later this month. That would remove 2.3 percent of global production, based on the IEA’s third-quarter supply figures.

Fully Deliver

After agreeing to trim output in September and October, members have yet to fully deliver on their promises, pumping 932,000 barrels a day more than the target of 27.3 million a day in November, according to estimates compiled by Bloomberg. Compliance is “not good enough,” OPEC Secretary-General Abdalla El-Badri said on Nov. 30.

Saudi Arabian Oil Minister Ali al-Naimi said Dec. 11 that the world’s largest exporter pumped 8.493 million barrels a day in November, which would be close to its OPEC quota and about 290,000 barrels a day less than the IEA has estimated.

The drop in prices means Saudi Arabia’s daily oil revenue has plunged about 66 percent, or $800 million a day, based on a 1.1 million barrel-a-day reduction in output through November, from July’s peak.

Venezuela Contracts

Venezuela’s economy probably will contract next year as lower oil revenue forces the government to trim spending, Morgan Stanley said last week. Iran’s Central Bank said last month that the country will face “big trouble” with oil below $60.

Khalid al-Falih, who will become chief executive officer of Saudi Aramco, the world’s biggest oil supplier, warned on Dec. 11 that falling oil prices will hurt investment in new fields, hampering the ability of producing nations to meet growing demand in future.

Goldman Sachs analysts Giovanni Serio and Jeffrey Currie identified 30 oil projects that require a price of $55 to break even, according to a Dec. 10 research note. Those ventures include Petroleo Brasileiro SA’s Tupi field, the biggest oil discovery in the Americas since 1976, and deepwater concessions in Angola belonging to BP Plc and Total SA.

Oslo-based StatoilHydro ASA and Royal Dutch Shell Plc of The Hague postponed investments in Canada’s oil sands this year after tumbling prices reduced potential profits.

OPEC will struggle to raise prices for now, said David Kirsch, a Kansas City-based industry consultant with PFC Energy.

“Even if OPEC tightens up crude, you’re probably not going to see a dramatic increase in prices, because refiners still won’t want to process it,” he said. “What OPEC needs to do is prevent a glut from forming in global inventories. That’s what led you to $9 a barrel in 1998.”

Dec. 15 (Bloomberg) -- OPEC should make a “sizable” cut in oil production at this week’s meeting because there are excess global stockpiles, OPEC Secretary-General Abdalla el- Badri said. The group expects Russia to help.

Organization of Petroleum Exporting Countries President Chakib Khelil said all the group’s members support an output cut at the meeting in Oran, Algeria, adding that he’s confident Russia, the biggest non-OPEC producer, will act to support the effort to revive prices. Global stockpile levels are at 57 days of forward cover, higher than their five-year average, Kuwait’s oil minister said.

“Two million barrels below current demand is what you’d need to reduce stockpiles by five days,” said Ronald Smith, chief strategist at Moscow-based Alfa Bank. “Today’s comments point to a larger cut than previously expected.”

The 13 members of OPEC, supplier of more than 40 percent of the world’s oil, are meeting for the fourth time in as many months to discuss production cuts after prices plunged more than $100 from July’s record. World demand will fall this year for the first time since 1983 as the global recession cuts fuel consumption, the International Energy Agency said last week.

“Stocks are very high, we have about 100 million barrels of oversupply in the market, we have to take them out,” El- Badri told reporters when he arrived at his hotel in Oran today.

‘Satisfying’ Price

Oil at $75 a barrel is “satisfying” to producers and consumers, Khelil said. Prices below $70 may cut investment in production, risking a renewed supply crisis, he said, adding that the scope of production cuts will decide how long it takes to remove surplus inventories from the market.

Crude oil for January delivery rose as much as $3.77, or 8.2 percent, to $50.05 a barrel before falling back on the New York Mercantile Exchange. The contract closed down $1.77, or 3.8 percent, at $44.51 a barrel.

OPEC, which agreed in October to reduce production by 1.5 million barrels a day from Nov. 1, has implemented 75 percent of the cut, said Khelil, who is also Algeria’s oil minister. Algeria has lowered production by 90,000 barrels a day and is producing 1.3 million barrels a day now, he said.

OPEC will probably lower output targets by at least 2 million barrels a day, or 7.3 percent, when its members meet Dec. 17, according to 18 of 33 analysts surveyed by Bloomberg. Kuwait’s Oil Minister said the country will push for a cut at the meeting.

OPEC is “very pessimistic about demand” next year, Khelil said, adding that current stock levels are five days higher than the five-year average of 52 days.

Oil consumption will fall by 200,000 barrels a day in the first quarter of 2009, and a further 1.2 million barrels a day in the second quarter, before rising again in the second half of the year, he said.

The group will meet again in March and start to gather more frequently, Khelil said.

World oil demand is likely to fall by an average of 500,000 barrels a day next year because of high crude prices and slumping economies, the Centre for Global Energy Studies said in a report today.

Dec. 15 (Bloomberg) -- Gold prices rose to the highest in two months as the slumping dollar boosted the appeal of the precious metal as an alternative investment. Silver jumped almost 4 percent.

The dollar fell 1.6 percent today against a weighted basket of six major currencies. Last week, the greenback tumbled 4 percent, the most since September 1985, while gold jumped 9.1 percent. The metal reached a record in March as interest-rate cuts by the Federal Reserve sent the dollar to an all-time low against the euro.

“One of the things gold has going for it is that it’s viewed as an international currency,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “We’re expecting the Fed to take the rate down from 1 percent to 0.5 percent. Gold is reacting to the downturn in the dollar.”

Gold futures for February delivery rose $16, or 2 percent, to $836.50 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $843.70, the highest for a most-active contract since Oct. 16. Last week’s gain was the biggest since mid-September. The metal has dropped 0.2 percent this year.

Silver futures for March delivery climbed 39 cents, or 3.8 percent, to $10.62 an ounce. The metal is still down 29 percent this year.

Policy makers tomorrow will cut the target rate for overnight loans between banks to 0.5 percent, the lowest since 1958, according to the median estimate of 84 economists in a Bloomberg survey. The benchmark rate was 5.25 percent in September 2007, when the Fed began to cut borrowing costs as the economy headed into a recession.

Before last week’s decline, the U.S. currency surged from July to November on demand for a haven as credit markets froze and equities plunged. Yields on one-month and three-month U.S. Treasury notes fell below zero last week.

Alternative Haven

Gold may benefit as investors seek an alternative haven to the dollar, analysts said. Since the collapse of Lehman Brothers Holdings Inc. in September, gold traded as high as $936.30 on Oct. 10. The metal reached a record $1,033.90 on March 17.

“Gold is finally reacting to the financial crisis and money creation,” said Adrian Day, the president of Adrian Day Asset Management in Annapolis, Maryland.

The U.S. has pledged $8.5 trillion through 23 different programs to ease the financial crisis and stimulate the economy.

“Inflationary pressures are likely to emerge in response to the colossal injections of public liquidity,” analysts at Citigroup Inc. said in a report. “Generally, commodity prices do well in a low interest rate inflationary environment.”

Some investors buy gold when consumer costs accelerate. The metal rallied 31 percent last year, when the inflation rate rose the most in almost two decades.

Dec. 15 (Bloomberg) -- Crude oil fell on speculation that OPEC production cuts may be insufficient to bolster prices as the global recession curbs fuel consumption.

U.S. fuel demand may drop further as manufacturing in the country declines. Chinese crude processing tumbled to the lowest in 15 months, a report showed. Prices rose earlier today when OPEC Secretary-General Abdalla El-Badri said the group needs to make a “sizable” output cut at this week’s meeting in Algeria.

“It’s becoming clear to some traders that no matter what OPEC does, it may not be enough, given the demand picture,” said Addison Armstrong, director of market research for Tradition Energy in Stamford, Connecticut.

Crude oil for January delivery fell $1.77, or 3.8 percent, to settle at $44.51 a barrel at 2:43 p.m. on the New York Mercantile Exchange. The price has tumbled 70 percent from a record $147.27 on July 11.

Industrial production declined 0.6 percent in November, the third drop in four months, the Federal Reserve said today in Washington.

China’s refineries processed 27.27 million tons of crude last month, or 6.64 million barrels a day, as an economic slowdown cut demand, the China Mainland Marketing Research Co. said in a statement today. That’s down 8.5 percent from 29.8 million tons in October. China is the second-biggest oil- consuming country, after the U.S.

“The demand side of the oil picture is looking gloomier after the release of the latest Chinese consumption numbers,” Armstrong said.

Lower Demand

The International Energy Agency, which coordinates energy policy in 28 developed countries, said in a Dec. 11 report that global oil demand will contract this year for the first time since 1983 and cut its outlook for 2009.

Consumption worldwide will shrink by 200,000 barrels a day, or 0.2 percent, to 85.8 million barrels a day in 2008, the IEA said in the monthly report. Next year consumption worldwide will increase by 400,000 barrels a day, or 0.5 percent, to 86.3 million barrels a day, the report showed. That was down 200,000 barrels a day from November’s forecast.

The Organization of Petroleum Exporting Countries will probably lower production targets by at least 2 million barrels a day, or 7.3 percent, at a Dec. 17 meeting in Oran, according to 18 of 33 analysts surveyed by Bloomberg News.

4 Million Barrels

“OPEC will have to cut 4 million barrels a day at a minimum, given the drop in demand and because of non-OPEC production, to stop the fall in prices,” said economist Philip Verleger, president of PKVerleger LLC in Aspen, Colorado.

Global stockpiles can meet 57 days of world demand, five days more than the five-year average, OPEC President Chakib Khelil said.

“Stocks are very high, we need to take action at this time,” El-Badri told reporters when he arrived at his hotel in Oran today. The oil market has 100 million barrels in excess stockpiles, he said.

The group, which agreed in October to reduce production by 1.5 million barrels a day starting Nov. 1, has implemented 75 percent of the cut, Khelil, who is also Algeria’s oil minister, told reporters in Oran.

“Everybody supports the cuts, I don’t have any doubts about it,” Khelil said. “The Saudis have reduced their supply to the market by 8 percent, which has had an effect on the market.”

Request of Russia

OPEC is asking Russia, the second-largest producer after Saudi Arabia, to reduce oil output by 200,000 to 300,000 barrels a day to help revive prices, OAO Lukoil Chief Executive Officer Vagit Alekperov said in Moscow today. Alekperov and Russia’s Deputy Prime Minister Igor Sechin are attending the meeting.

“In addition to an OPEC cut of 4 million barrels, Russia will have to cut by 400,000 barrels to support prices, and I don’t think either of these will happen,” Verleger, said.

February oil options rose and January contracts fell as traders rolled their positions in electronic trading before the expiration of January options tomorrow in New York. Bets that January oil will rise above $50 a barrel were the most active of the day. Bets February oil will fall below $40 or rise above $53 were the most active contracts for the next trading month.

January $50 calls fell 65 cents to 16 cents a barrel, or $160 a contract, at 1:24 p.m. on the New York Mercantile Exchange. The contract traded 1,168 lots. One contract is for 1,000 barrels of oil. January $45 puts added 10 cents to $1.60 a barrel, or $1,600 a contract, on trading of 827 contracts.

Volume in electronic trading on the exchange was 425,982 contracts, as of 2:59 p.m. in New York. Volume totaled 578,164 contracts on Dec. 12, up 12 percent from the average over the past 3 months. Open interest on Dec. 12 was 1.16 million contracts. The exchange has a one-day delay in reporting open interest and full volume data.

Brent crude oil for January settlement declined $1.81, or 3.9 percent, to settle at $44.60 a barrel on London’s ICE Futures Europe exchange.

Dec. 16 (Bloomberg) -- The dollar traded near a two-month low against the euro on speculation the Federal Reserve will cut the target rate for overnight lending to the lowest on record.

The greenback approached a 13-year low against the yen yesterday before the release of a U.S. Commerce Department report forecast by economists to show housing starts dropped last month to the lowest level since records began in 1959. The dollar dropped versus the pound and the Danish krone on reduced demand for the greenback as a haven.

“We will stay in a low-interest-rate environment for some time,” said Fabian Eliasson, vice president of currency sales at Mizuho Corporate Bank Ltd. in New York. “That will take away interest-rate play, and the dollar will suffer.”

The dollar traded at $1.3698 per euro at 7:04 a.m. in Tokyo, after falling 2.3 percent yesterday and touching $1.3710, the weakest level since Oct. 14. The dollar was quoted at 90.64 yen following a 0.6 percent decline. It dropped to 88.53 yen on Dec. 12, the lowest level since August 1995. The euro traded at 124.16 yen after increasing 1.9 percent.

The ruble fell as much as 2.2 percent to a four-year low of 37.8611 per euro after Russia’s central bank devalued the currency for a second time in a week yesterday. Against the dollar, the ruble traded at 27.6130. Russia has drained 27 percent of its reserves, the world’s third-largest, trying to stem a 16 percent decline in the currency against the dollar since August.

Dollar This Year

The dollar slid 2.2 percent to $1.52979 against the pound and 2.3 percent to 5.4465 Danish krone yesterday as the cost of borrowing in the greenback tumbled to the lowest in more than four years. The three-month London interbank offered rate, or Libor, for dollars fell for a fifth day, decreasing 0.05 percentage point to 1.87 percent, the lowest level since September 2004, according to British Bankers’ Association data.

The greenback’s drop versus the euro accelerated yesterday when it broke through $1.36, Bloomberg data show. That level is the edge of an Ichimoku “cloud” in which orders to sell the euro were clustered, according to Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. Ichimoku was the pen name of a Japanese journalist who developed the charting system.

“This is real rip-roar dollar selling going on,” Dolan said. “We’ve blown through a number of key levels.” The next critical level of so-called resistance is $1.3820, Dolan said.

The dollar gained 6.8 percent against the euro this year, 30 percent versus the pound and 6.7 percent against the krone as investors bought the greenback to flee riskier assets and repay dollar-denominated loans from lenders reining in credit.

Euro Net Shorts

Traders decreased their bets that the euro will decline against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 16,668 on Dec. 9, compared with net shorts of 20,197 a week earlier.

Futures on the Chicago Board of Trade showed a 66 percent chance the Fed will trim its 1 percent target rate for overnight lending between banks today to 0.25 percent, the all-time low, compared with zero odds a month ago. Such a reduction would mean the fed funds target would trail Japan’s 0.3 percent benchmark, the lowest in the industrialized world.

‘Further’ Fed Action

“Expectations are strong that we will see further action from the Fed,” said Sebastien Galy, a currency strategist at BNP Paribas Securities SA in New York. “The yield differential is turning less in favor of the dollar.”

The housing recession that triggered the credit crisis and the ensuing recession shows no signs of abating. New-home starts in November dropped to a 736,000 annual pace, the lowest level since records began in 1959, the Commerce Department is forecast by economists to report before the Fed’s decision.

The dollar extended its drop versus the pound and the Danish krone after the U.S. Treasury reported yesterday that international demand for long-term U.S. financial assets weakened in October as foreign investors sold American stocks, corporate bonds and agency debt.

Total net purchases of long-term equities, notes and bonds fell to a net $1.5 billion in October from $65.4 billion the previous month, the Treasury said in Washington. Including short-term securities such as stock swaps, foreigners bought a net $286.3 billion, compared with net buying of $142.6 billion the previous month.

Monday, December 15, 2008

FCPO 3rd month February futures contract close marginally RM5 lower to close RM1576 as compare to previous trading session with 2925 lots traded in the market. CPO price was opened higher due strong price trading for crude oil and soybean oil electronic but latter retrace back possibly because of some profit taking activities.

Technically, CPO price seems to support above the RM1575 support region after fails to breach the 23.6% Fibonacci projection resistance levels at RM1625 region. We expect CPO price would be trading lower in the coming trading session as hourly showing CPO price seems to traded sideways within RM1700 and RM1400 range. Traders were advice to hold short position for short term trading provided if the resistance levels at RM1630 and RM1680 were not violated while supports were seen at RM1550 and RM1500 region.

FKLI December futures contract rose 7.5 point higher as compare previous trading session to close at 857 with total of 3463 lots traded in the market. FKLI was opened higher during trading session due to another contradicting news release that the Auto bailout plan was carry as planned. However, FKLI later was traded lower as Dow Jones futures electronic trading plunge towards the downside.

Technically, FKLI price successfully holding above the resistance trend line while manage to close from the previous trading session’s gap. We expect FKLI would be trading higher in the coming trading session provided if support levels at 840 and 830.5 were not violated. Traders were advice to hold long position once the resistance levels at 865 and 877 were breached.

Crude advanced on speculation the Bush administration will rescue U.S. carmakers and the Organization of Petroleum Exporting Countries may make the biggest supply cut in a decade. Palm oil, used mainly in food, tracked crude prices much of this year as it is viable for use as a biofuel when oil trades above $80 a barrel.

“Although agriculture commodities have decoupled from crude oil’s downward move, a rise in crude oil price could still turn out to have positive effects on soybean and palm oil due to the rising biodiesel margin,” Alvin Tai, an analyst at OSK Research Sdn. in Kuala Lumpur, said in a report today.

Palm oil for January delivery rose as much as 3.1 percent to 1,630 ringgit ($449) a ton on the Malaysia Derivatives Exchange. Futures were at 1,604 ringgit at 11:45 a.m. local time.

Crude oil for January delivery rose as much as 2.6 percent to $47.49 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It last traded at $47.20 and reached a four-year low of $40.50 on Dec. 5.

Palm biodiesel at $610 a ton is profitable as an alternative fuel although crude oil prices have declined, said Tai. Crude palm oil prices could rise to 1,735 ringgit before the biodiesel margin turned negative and have room to move higher, he said.

Dec. 15 (Bloomberg) -- Crude oil rose in New York on speculation state support for heavy industry and banks may help slow the decline in global economic growth and maintain demand for fuel and energy.

Canada is considering financial support for its foresters and miners and will contribute to any rescue package the U.S. offers North American automakers, Industry Minister Tony Clement said yesterday. Ireland may invest as much as $13.4 billion in its banks, while the U.K. is considering loans and guarantees to aid its carmakers, the Sunday Times reported.

Car-making “is a fairly key sector for the U.S. economy,” said Toby Hassall, research analyst with Commodity Warrants Australia Pty in Sydney. “I do expect a rescue package in some form to go through quite soon.”

Crude oil for January delivery rose as much as $1.13 cents, or 2.4 percent, to $47.41 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $47.12 at 8:18 a.m. in Singapore.

The contract fell $1.70, or 3.5 percent, to $46.28 on Dec. 12 after the U.S. Senate rejected a proposed $14 billion rescue package for the nation’s automakers. Prices fell as much as 9.7 percent before recovering after the Bush administration said it may tap the nation’s $700 billion bank-bailout fund to provide carmakers some short-term relief.

“I am optimistic” the U.S. will provide a rescue package, Canada’s Clement said on CTV yesterday. “The Bush administration has made it pretty clear that they think a rescue is necessary to save the entire industry.”

Production, Confidence

A report today will probably show industrial production in the U.S., the world’s largest oil consumer, contracted 0.9 percent last month as automakers cut output, according to a survey of economists. Sentiment among the largest manufacturers in Japan, the third-largest oil user, fell the most in 34 years according to the nation’s quarterly Tankan survey today.

“The whole macro picture is key,” Commodity Warrants’ Hassall said.

Brent oil for January settlement was up 84 cents, up 1.8 percnet, to $47.25 on London’s ICE Futures Europe exchange. The contract, which expires tomorrow, fell 98 cents, or 2.1 percent, to $46.41 on Dec. 12. The more actively traded February contract rose 1.3 percent to $49.72. It fell 1.9 percent to $49.08 on Dec. 12.

New York futures are down 68 percent from the July 11 record of $147.27 and touched a four-year low of $40.50 on Dec. 5.

Prices rose 13 percent last week as talks on the U.S. auto- rescue progressed and Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, said it is already cutting production.

“There is fairly strong support” for oil around current levels, Commodity Warrants’ Hassall said. “OPEC is going to make a supply-side response quite soon” while government stimulus packages will also start being felt, he said.

The global slump may reduce daily oil use to 85.8 million barrels in 2008, the first decline since 1983, the International Energy Agency said Dec. 11. A forecast 0.5 percent increase in fuel use next year may be wiped out if the recession deepens, the Paris-based agency said.

Dec. 15 (Bloomberg) -- Gold may rise for the second straight week on speculation the Federal Reserve will cut its benchmark bank-lending rate, weakening the dollar and boosting the appeal of the precious metal.

Twenty-one of 27 traders, investors and analysts surveyed from Mumbai to Chicago on Dec. 11 and Dec. 12 advised buying gold, which rose 9.1 percent last week to $820.50 an ounce in New York. Three said to sell, and three were neutral.

Last week’s gain was the biggest since Sept. 19. Gold reached a record $1,033.90 in March as Fed rate cuts sent the dollar to an all-time low against the euro in July.

Gold’s gains last week surprised most analysts surveyed on Dec. 4 and Dec. 5. The survey has forecast prices accurately in 142 of 241 weeks, or 59 percent of the time.

Dec. 15 (Bloomberg) -- The yen rose, approaching a 13-year high against the dollar, due to uncertainty over whether U.S. President George W. Bush will use funds set aside for banks to bail out the country’s automakers.

The yen also advanced against the Australian and New Zealand currencies after the U.S. Senate last week rejected legislation to provide General Motors Corp. and Chrysler LLC with $14 billion, deterring investors from buying higher- yielding assets. The yen remained higher after the Bank of Japan’s Tankan index of business sentiment plunged the most in 34 years.

“There’s no meaningful obstacle to further yen appreciation,” said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co. Ltd., a unit of Japan’s largest brokerage. “Uncertainty about how the U.S. will rescue its automakers supports the yen.”

The yen rose to 90.78 per dollar as of 8:53 a.m. in Tokyo from 91.21 late in New York on Dec. 12, when it advanced to 88.53, the strongest level since August 1995. It was little changed at 121.97 versus the euro from 121.83 last week. The dollar declined to $1.3436 per euro from $1.3369 on Dec. 12, after touching an eight-week low of $1.3454. The yen may rise to 90 per dollar today, Amikura said.

The Bush administration said on Dec. 12 it will consider using money from its $700 billion bank-bailout fund to prevent GM and Chrysler from “collapsing.” A bankruptcy filing by either company would worsen the longest recession since the early 1980s.

The Tankan index that measures confidence among large makers of cars and electronics slid to minus 24 from minus 3, the BOJ said today in Tokyo. A negative number means pessimists outnumber optimists. Economists expected the index to decline to minus 23, according to a Bloomberg News survey.

Sunday, December 14, 2008

FCPO February futures contract plunge RM63 lower compare to previous trading session and close at RM1581 with a total 4517 lots traded in the market. CPO price plunge despite strong overnight closing for crude oil and soybean oil.

Technically, CPO seems failed to breach the resistance levels at RM1680 region on the 3rd attempt and manage to pull back 50% Fibonacci retracement levels at RM1570 region. Based on hourly chart wave count, we expect CPO would challenge the next resistance level at RM1680 and RM1723 region again before starts to retrace back for sideways trading again. Traders were advice to hold long position around the support levels at RM1570 and RM1550 region in the coming trading session.

FKLI December contract close 9.5 points lower at 849.5 as compare with previous trading session with a total of 5470 lots traded in the market. FKLI plunge during trading session due news released that Auto bailout plan was rejected by the senate has cause regional indices plunge during the tradingsession.

Technically, hourly support trend line was challenged during last Friday trading session but manage to hold above the trend line on the 2nd hourly bar chart. However, 846 region was seen as 78.6% Fibonacci retracementfigure from 841 to 862 regions. Technically, FKLI was seen still trading sideways within 846 to 860 ranges while we would expect FKLI to break above the resistance trend line a 860 level and heading towards next resistance levels at 877. Traders were advice to hold long position around the support levels at 840 and 850 regions.

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